Pound Australian dollar exchange rate tumbles as AU services PMI smashes forecasts
The pound Australian dollar (GBP/AUD) exchange rate is trending lower this morning following stronger-than-expected Australian PMIs.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9191, down approximately 0.5% from this morning’s opening rate.
Australian dollar (AUD) surges as services PMI nears two-year high
The Australian dollar is extending its overnight gains this morning following a better-than-forecast services PMI.
The finalised purchasing managers index surprised to the upside, printing at 54.3 in March, up from February’s 53.1 and surpassing forecasts of 53.5. The data showed the second consecutive month of expansion in Australia’s services sector, as well as marking the fastest pace of growth in the sector since April 2022.
Economists at Judo Bank attributed the growth to an increase in new businesses, as higher client demand drives a greater influx of new work.
AUD continues to climb this morning as an upbeat spell of trade underpins its recent wins, allowing the risk-sensitive ‘Aussie’ to strengthen against its major rivals.
Pound (GBP) slumps amid data lull
The pound (GBP) is facing headwinds against some of its major peers this morning as UK data remains sparse.
Amid a lack of macroeconomic releases, towering Bank of England (BoE) interest rate cut bets serve to weigh on GBP exchange rates.
Speculations that the central bank will begin its unwinding cycle in just two months keeps investor interest in GBP at bay, with markets pricing in four interest rate cuts this year, with the likelihood that monetary loosening could occur in June standing at 75%.
James Smith, Developed Markets Economist at ING said:
‘We think a June rate cut is growing more likely but is far from guaranteed. Much hinges on April’s services inflation data which we think could come in above Bank of England forecasts and tempt the committee to wait a little longer before cutting rates. Whatever happens, we expect at least four rate cuts this year.’
Pound Australian Dollar exchange rate forecast: AU trade data to sink the ‘Aussie’?
Looking ahead, Australia’s latest trade data is due for release tomorrow. Given the commodity-driven nature of Australia’s economy, the trade balance could spark notable volatility amid a forecast narrowing of AU’s trade surplus. Falling coal and iron ore prices in recent weeks may contribute to a notable decline in February’s trade surplus, which could see the commodity-fuelled ‘Aussie’ slump.
Also due for release overnight is Australia’s latest retail data. Economists expect to see retail sales slump to 0.3% February’s monthly figure, falling from the previous month’s 1.1% increase. Should the data print as forecast, AUD may face headwinds amid signs of persistently weak consumer activity. However, should the data surprise to the upside, signs of resilient consumer spending may see AUD rally.
Looking to the UK, a data-light end to the week could therefore see GBP trade without a clear direction. Amid thin trading conditions, Sterling could move accordingly with a shifting market sentiment. A spell of gloomy trade could see USD strengthen against its more risk-sensitive peers, while cheery trading conditions will likely see AUD take precedent.